The bulk of our discussions in class have been centered around the sources of strength of Israel’s entrepreneurial and business culture–for example: the influx of educated immigrants from Eastern Europe, technology and leadership training from the IDF, and a unique, “get it done” business mentality.

The main threat to Israel’s continued success seems to be external, in the form of the country’s ever-hostile neighbors. However, there are also a slew of secondary foreign concerns that present problems for the continued success of Israel’s businesses and startups.

Israel has been suffering from an increasingly high rate of brain drain, or highly educated Israelis leaving the country to study or work elsewhere. In 2011 up to 14% of Israeli STEM Ph.D. holders had been gone from the country for three years, with only 4% returning after having been gone for more than three years (Kalman). This trend is also present with non-Ph.D. degrees, although less prevalent. Although Israel may do an excellent job of fostering entrepreneurial growth, it needs to retain the source of innovation.

One could argue that this trend is only slightly troubling, as Israel has in recent years been attracting large amounts of talent from other countries, but increasing reliance on foreigners for continued business growth is a strategy that will almost certainly fail.

This increased reliance on foreign input is also problematic in Israel’s venture capital industry. 31% of Israel’s startups in 2010 relied on foreign funding, increasing to 52% in 2012 (Orbach). Furthermore, the Israeli government extended several tax breaks to foreign investors in the early 2000s, but has failed to extend the same benefits to domestic funds. For a country that fared extremely well during the recession, this increased reliance on foreign capital is troubling as it increases the country’s exposure to global financial shocks.

It is concerning that our class seems to focus heavily on the strengths (numerous as they are) that support Israel’s entrepreneurial success, while glossing over the weaknesses. Addressing these weaknesses more thoroughly would create a more balanced understanding of the state of Business and Entrepreneurship in Israel.

Kalman, Aaron. “Israelis with advanced degrees more likely to leave country.” The Times of Israel. N.p., 27 Dec. 2012. Web. 12 Feb. 2013. .

Orbach, Meir. “Foreign high-tech investments outdo Israeli investors.” Ynet News. N.p., 26 Mar.2012. Web. 5 Feb. 2013. .

Miquel
Class of 2013